Alkermes Plummets 8.6% on Breakthrough Narcolepsy Data – What’s Next?

Summary
• Alkermes (ALKS) crashes 8.6% to $26.71, its lowest since April 2025
• Positive phase 2 results for narcolepsy drug alixorexton spark regulatory optimism
• Sector peers mixed as biotech sector grapples with Sarepta’s FDA woes

Alkermes’ shares imploded on Tuesday, trading nearly 9% below Monday’s close amid a deluge of data from its phase 2 narcolepsy trial. The stock’s intraday range of $26.05–$28.98 highlights a volatile session driven by conflicting signals: robust clinical results versus a bearish technical setup. With the biotech sector under pressure from Sarepta’s clinical hold drama and Takeda’s cautious optimism, investors are scrambling to parse whether ALKS’s drop is a buying opportunity or a red flag.

Positive Narcolepsy Trial Results Spark Sharp Sell-Off
Alkermes announced positive phase 2 results for alixorexton, its orexin 2 receptor agonist, showing statistically significant improvements in wakefulness and symptom severity for narcolepsy type 1. Despite these clinical milestones, the stock plummeted 8.6% as traders sold ahead of the September World Sleep Congress presentation. The sell-off reflects a mix of profit-taking from pre-announcement longs and skepticism about the drug’s path to phase 3 approval. The market’s bearish reaction also aligns with broader biotech jitters, as Sarepta’s FDA issues and AstraZeneca’s failed amyloidosis trial dampened risk appetite.

Biotech Sector Mixed as Takeda Gains, Alkermes Tumbles
The biotech sector saw a mixed performance, with Takeda Pharmaceutical (TAK) rising 0.31% on its oveporexton narcolepsy trial success, while Alkermes’s drop highlighted divergent market reactions. Sarepta’s ongoing FDA scrutiny and AstraZeneca’s phase 3 miss further pressured the sector, creating a fragmented landscape. ALKS’s sharp decline, despite positive data, underscores the sector’s sensitivity to regulatory uncertainty and short-term profit-taking.

Bearish Setup Favors Put Options Amid Volatility Expansion
• 52W High/Low: $36.45/$25.56 (current at $26.71, 28% below 52W high)
• 200D MA: $30.26 (well below current price)
• RSI: 54.45 (neutral but bearish divergence)
• MACD: -0.16 (bearish crossover)
• Bollinger Bands: $28.28–$30.26 (price at lower band)

ALKS’s technicals point to a short-term bearish bias, with key support at $26.05 and resistance at $28.28. The RSI’s 54.45 level and MACD’s negative momentum suggest further downside potential. For leveraged bets, consider the ALKS20250815P25 (put option with 28.56% leverage) or ALKS20250815P26 (24.86% leverage).

Top Option 1: ALKS20250815P25
• Code: ALKS20250815P25
• Type: Put
• Strike: $25
• Expiry: 2025-08-15
• IV: 63.10% (mid-range volatility)
• LVR: 28.56% (moderate leverage)
• Delta: -0.299 (moderate sensitivity)
• Theta: -0.0149 (slow decay)
• Gamma: 0.0768 (high sensitivity to price moves)
• Turnover: $10,879 (liquid)
• Payoff at 5% drop: $0.675 (26.71 → $25.37)
• This put offers a balance of leverage and liquidity, ideal for a 5% downside scenario.

Top Option 2: ALKS20250815P26
• Code: ALKS20250815P26
• Type: Put
• Strike: $26
• Expiry: 2025-08-15
• IV: 53.44% (reasonable volatility)
• LVR: 24.86% (moderate leverage)
• Delta: -0.375 (moderate sensitivity)
• Theta: -0.0089 (slow decay)
• Gamma: 0.099 (high sensitivity to price moves)
• Turnover: $4,863 (liquid)
• Payoff at 5% drop: $0.175 (26.71 → $25.37)
• This put is slightly out-of-the-money but offers high gamma for directional bets.

Action: If $26.05 breaks, consider ALKS20250815P25 for short-term bearish exposure. Aggressive bulls may wait for a bounce above $28.28 before reentering.

Backtest Alkermes Stock Performance
The backtest of ALK's performance after a -9% intraday plunge shows mixed results. While the stock recovered positively in the short term, the overall performance was modest, with the 3-day win rate at 38.46% and the 10-day win rate at 41.11%. The maximum return during the backtest period was 5.39%, which occurred on day 59, indicating that while the stock had a chance to recover, the returns were not significantly high.

Short-Term Bearish Bias Intact – Watch Takeda’s Oveporexton Play
ALKS’s sharp decline reflects a bearish technical setup and sector-wide caution. The stock’s 8.6% drop, despite positive data, signals short-term profit-taking and regulatory skepticism. Key levels to watch: $26.05 (intraday low) and $28.28 (Bollinger lower band). For context, sector leader Takeda (TAK) rose 0.31% on its oveporexton success, highlighting divergent market reactions. Traders should prioritize liquidity and leverage in options while monitoring the September World Sleep Congress for catalysts. Watch for $26.05 breakdown or regulatory reaction.